Researchers Aleksander Ellis, Stephen Humphrey, and Donald Conlon of Michigan State University and Catherine Tinsley of Georgetown University have studied this new transactional form, which they call brokered ultimatum games, or BUGs. They define a BUG as any transaction involving an intermediary in which one side offers an ultimatum price that the other side either accepts or rejects.

These researchers are particularly interested in bidders’ fairness perceptions of the negotiation. As the success of Priceline indicates, when it comes to BUGs, the faster the response, the more satisfied the customer. In addition, study participants are more satisfied with a BUG and more likely to use it again and to refer others to the BUG when their offers are accepted – no surprise there.

More interestingly, when an offer is rejected, long-term customer satisfaction can be enhanced by a detailed explanation of the rejection. This finding has broad implications for organizations that must reject offers and bids from suppliers or customers with which they may want to do business in the future. Naturally, a company is likely to be satisfied when you give it your business and dissatisfied when you take your business elsewhere. When you’re delivering bad news, procedural justice, the perceived fairness of a given negotiation, becomes an important consideration.

So the next time you’re forced to turn down an offer, consider giving the other firm a thorough explanation of your decision. In doing so, you may gain more options and more favorable trading partners in the future.

Teaching Negotiation Resource Center

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Preparing for Negotiation

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.